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| 1 | |
The purpose of adjusting entries is to: |
| | A) | recognize revenue earned but not yet recorded. |
| | B) | recognize expenses incurred but not yet recorded. |
| | C) | recognize the earned portion of services paid for in advance. |
| | D) | recognize all of the above. |
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| 2 | |
Every adjusting entry involves the recognition of either revenue or expense. Which of the following is also true? |
| | A) | There also must be a corresponding change in capital stock. |
| | B) | There also must be a corresponding change in either assets or liabilities. |
| | C) | There also must be a corresponding change in the cash account. |
| | D) | Both (A) and (B). |
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| 3 | |
When recording the adjusting entry to recognize the consumed portion of unexpired insurance, the adjusting entry will include which of the following? |
| | A) | A debit to Insurance Expense |
| | B) | A debit to Unexpired Insurance |
| | C) | A credit to Cash |
| | D) | A credit to Insurance Expense |
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| 4 | |
The original cost of a physical asset was $45,000. It was purchased on January 5, 2015. It has an estimated useful life of 10 years and has been depreciated under the straight-line method for 5 years. At the end of the 6th year, after adjusting entries have been recorded and posted, the book value of the physical asset will be which of the following? |
| | A) | $22,500 |
| | B) | $27,000 |
| | C) | $18,000 |
| | D) | $40,500 |
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| 5 | |
On November 18, the company received $24,000 for services to be performed over the following three months. Cash was debited for $24,000 and Unearned Services Revenue was credited for $24,000. None of the services were provided in November. One-third of the services were completed by December 31. The adjusting entry for December 31 would include which of the following? |
| | A) | A debit to Unearned Services Revenue and a credit to Accounts Receivable for $8,000. |
| | B) | A credit to Services Revenue and a debit to Cash for $16,000 |
| | C) | A credit to Services Revenue and a debit to Accounts Receivable for $8,000 |
| | D) | A debit to Unearned Services Revenues and a credit to Services Revenue for $8,000 |
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| 6 | |
On November 16, the company borrowed $24,000 for 90 days at 6% interest. Interest expense was not adjusted at the end of November. The adjusting entry made on December 31 would include which of the following? |
| | A) | A debit to Interest Expense of $360 |
| | B) | A debit to Interest Expense of $120 |
| | C) | A credit to Interest Payable of $180 |
| | D) | A credit to Interest Payable of $480 |
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| 7 | |
When adjusting for revenue that has accrued (been earned) but has not been recorded, which of the following will occur? |
| | A) | An asset account is increased and a revenue account is increased. |
| | B) | A revenue account is increased and an expense account is increased. |
| | C) | A revenue account is increased and a liability account is decreased. |
| | D) | A revenue account is increased and a liability account is increased. |
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| 8 | |
The realization principle requires: |
| | A) | that revenues earned but not yet received be recognized through an adjusting entry. |
| | B) | that unearned revenues originally recorded as earned be converted to a liability through an adjusting entry. |
| | C) | that the consumption of assets originally recorded as assets be recognized as expenses through an adjusting entry. |
| | D) | both (A) and (B). |
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| 9 | |
Which of the following is false? |
| | A) | The materiality concept permits charging purchases of low cost items directly to an expense account. |
| | B) | Debiting utilities expense when paid, rather than as the services are used, adheres to the matching principle. |
| | C) | Immaterial amounts of unrecorded expenses may be ignored during the adjusting process. |
| | D) | Adjusting entries may be made based on estimates. |
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| 10 | |
An adjusting entry was made in which Unearned Services Revenue was debited for $4,000 and Services Revenue was credited for $4,000. However, this journal entry was posted to the Unearned Services Revenue account as a debit and to the Office Supplies 10pense account as a credit. As a consequence of this error, the: |
| | A) | trial balance will have a credit balance $4,000 greater than the debit balance. |
| | B) | trial balance will have equal totals of debit and credit balances. |
| | C) | trial balance will have a debit balance $4,000 greater than the credit balance. |
| | D) | net income will be overstated $4,000. |
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